Daily Insight
Group Economics Macro & Financial Markets Research
Euro economy shakes off Greece
Aline Schuiling, Maritza Cabezas +31 20 343 5606
24 June 2015 • • •
The eurozone composite PMI rose to its highest level since May 2011 in June … … suggesting that the eurozone economy has remained unaffected by the Greek crisis so far US business investment picks up in May, showing better prospects for the US economy
Eurozone composite PMI higher than expected
Eurozone composite PMI and GDP growth
The eurozone composite PMI increased to 54.1 in June, up
index
from 53.6 in May. The outcome was better than the consensus forecast of a small decline and the rise lifted the composite index to its highest level since May 2011. It was the combined result of an increase in the services sector PMI (to 54.4 from 53.8) and in the manufacturing output index (to 53.5 from
60
1.5 1.0 0.5 0.0 -0.5 -1.0 -1.5 -2.0 -2.5 -3.0
55 50 45
53.3). At its current level the composite PMI is consistent with
40
GDP growth strengthening somewhat at the end of Q2-start of
35
Q3, which is in line with our scenario for the eurozone
30
economy. Indeed, we expect GDP growth to rise to quarterly
% qoq
04 05 06 07 08 09 10 11 12 13 14 15 GDP (rhs)
rates of around 0.6% in the second half of this year, up from the 0.4% qoq that was recorded in Q1.
Composite PMI (lhs)
Source: Thomson Reuters Datastream
Three tailwinds … The eurozone economy currently is benefitting from three tailwinds: a weak euro, low oil prices and easy financial conditions. The ECB’s QE policy has not only pushed the euro lower, but has also resulted in a market decline in bank lending rates, particularly in the periphery. Combined with the fact that banks have eased lending conditions in the past few quarters, this has opened the bank credit channel. Meanwhile, the drop in oil prices since the middle of last year is still working its way through the economy, lifting consumers’ spending power and lowering the energy bill of companies. These factors seems to have a stronger bearing on the eurozone economy than the negative influence of the rising fears for a Grexit.
US business investment picks up in May A key measure of business investment, core durable goods orders, excluding defense and aircraft, advanced 0.4% in May, after falling 0.3% the previous month. March’s business investment was, however, considerably strong, increasing 1.6%. Another component of the report, shipments of core capital goods, which are used by the BEA to estimate investment in durable equipment for GDP, increased 0.3% in May. Manufacturing, in general, has been affected by the strong dollar and lower oil prices, which has resulted in spending cuts in the energy sector. However, it looks to be shaking off these effects. Meanwhile the headline number of the report, durable goods orders fell -1.8% in May from -1.5%
… stronger than the headwind of Greece Rising fears for a Grexit have hurt risk appetite in financial markets in the past few weeks, weighing on equity markets
the previous month. The decline in the past two months of the headline number reflected a fall in aircraft orders, a volatile component in the report.
and peripheral bond markets in particular. However, part of these losses have been gained back in the past couple of days, following the new proposals by the Greek government, which have opened the way for a deal between Greece and its creditors. Indeed, all the parties involved seem committed to reaching a deal later this week, and we think that this is the most likely outcome of the current negotiations. Therefore, we think that the impact of the Greek crisis on the overall eurozone economy should remain limited.
Better prospects for the US economy in the second quarter This report suggests that there is some momentum in business investment. In this second quarter we expect to see the economy recovering from a temporary slowdown. Other sectors in the economy have already been showing signs of strength, including the housing sector and retail sales.
2
Euro economy shakes off Greece – 24 June 2015
Financial markets Currency markets
Close
Change 1 day
Change 5 days
EUR/USD USD/JPY
1.1181
-1.6017
123.84
0.4298
0.3566
3.3378
AUD/USD
0.7732
0.0000
-0.2194
-5.3031
USD/CHF
0.9339
1.4668
0.1072
-6.0368
NZD/USD
0.6849
-0.3347
-1.9611
-12.1360
GBP/USD
1.5733
-0.6128
0.6268
0.9755
USD/SGD
1.3404
0.3970
-0.2382
1.1928
USD/CAD
1.2328
0.1300
-0.0811
6.1386
Bond markets
Close
Change 1 day
-0.5426
Change YTD
Change 5 days
-7.5950
Change YTD
2-year German Govt Bond yield
-0.1920
-0.0030
0.0030
-0.0940
10-year German Govt Bond yield
0.8660
-0.0180
0.0680
0.3250
Yield curve Germany
1.0580
-0.0150
0.0650
0.4190
2-year US Treasury Bond yield
0.6657
0.0082
-0.0198
0.0012
10-year US Treasury Bond yield
2.3833
0.0108
0.0740
0.2121
Yield curve US
1.7176
0.0026
0.0938
0.2109
US 2-year sw ap rate
0.9172
0.0172
-0.0350
0.0229
US 10-year sw ap rate
2.4700
0.0342
0.0618
0.1839
US sw ap curve
1.5528
0.0170
0.0968
0.1610
EU 2-year sw ap rate
0.1298
-0.0027
-0.0302
-0.0452
EU 10-year sw ap rate
1.2203
-0.0159
0.0640
0.4083
EU sw ap curve
1.0905
-0.0132
0.0942
0.4535
-0.0140
0.0000
0.0000
-0.0920
Euribor 3 Month ACT/360 ICE LIBOR USD 3 Month
0.2823
0.0010
-0.0010
0.0267
JPMorgan EMBI Plus Sovereign S
381.8400
-12.0300
-15.6700
-5.6000
Equity markets
Close
Change 1 day %Change 5 days %Change YTD%
Nikkei 225
20,809
1.87
2.72
19.25
Hang Seng Index
27,333
0.93
2.89
15.80
Hang Seng China Enterprises Index
13,609
1.69
2.69
13.56
Australian Stock Exchange S&P/ASX 200 Index
5,684
1.32
2.68
5.05
Singapore Straits Times Index
3,340
0.74
1.26
-0.75
Euro Stoxx 50 Index
3,633
1.02
5.17
15.45
S&P 500 Index
2,122
-0.02
1.25
3.08
MSCI World Daily Total Return Gross USD
816
1.22
2.20
6.25
AEX Index
495
1.07
4.16
16.60
13
-1.81
-15.53
-34.84
Chicago Board Options Exchange Volatility Index
Commodity markets Reuters/Jefferies CRB Total Return Gold spot USD/Oz
Close
Change 1 day %Change 5 days %Change YTD%
224
0.50
-0.24
-2.92
1,178
-0.66
-0.35
-0.57
Generic first NYMEX Crude Light future
61
0.93
1.62
14.40
Generic first Brent Crude Oil future
64
1.33
0.75
11.95
5,774
2.11
0.41
-8.36
508
1.30
3.89
-13.90
LME Copper 3 Months Rolling Forw ard Generic first Wheat future Chicago Board of Trade Source Bloomberg
3
Euro economy shakes off Greece – 24 June 2015
Day
Date
Time
Country
Key Economic Indicators and Events
Monday Monday
6/22/2015 6/22/2015
16:00:00 19:00:00
US EC
Existing home sales - % mom Euro area leaders hold emergency meeting on Greece
Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday Tuesday
6/23/2015 6/23/2015 6/23/2015 6/23/2015 6/23/2015 6/23/2015 6/23/2015 6/23/2015 6/23/2015 6/23/2015 6/23/2015
03:45:00 08:45:00 10:00:00 10:00:00 10:00:00 13:00:00 14:00:00 14:30:00 15:00:00 15:45:00 16:00:00
CN FR EC EC EC TR HU US US US US
PMI manufacturing - index (HSBC) - flash Business confidence manuf. - index PMI services - index Composite PMI output PMI manufacturing - index Repo rate - % Base rate -% New durable goods orders - % mom FHFA house price index - % mom Markit - Flash PMI New homes sold - % mom
Wednesday Wednesday Wednesday Wednesday
6/24/2015 6/24/2015 6/24/2015 6/24/2015
09:30:00 10:00:00 14:30:00 18:00:00
NL DE US FR
Producer confidence manufacturing - index Ifo - business climate - index GDP - % qoq annualised Total jobseekers - thousands
Thursday Thursday Thursday Thursday
6/25/2015 6/25/2015 6/25/2015 6/25/2015
13:00:00 14:30:00 14:30:00 14:30:00
CZ US US US
Repo rate - % Initial jobless claims - thousands PCE deflator core - % mom PCE deflator core - % yoy
Friday Friday Friday Friday
6/26/2015 6/26/2015 6/26/2015 6/26/2015
01:30:00 01:30:00 10:00:00 16:00:00
JP JP EC US
CPI - % yoy Unemployment - % M3 growth - % yoy Univ. of Michigan cons. confidence - index
Period
Latest outcome
Consensus
ABN AMRO
May
-3.0
4.2
4.8
Jun P Jun Jun P Jun P Jun P Jun-23 Jun-23 May Apr Jun P May
49.2 103.0 53.8 53.6 52.2 7.5 1.65 -1.0 0.3 54.0 7.0
49.4 102.0 53.7 53.6 52.2 7.5 1.50 -0.7 0.5 54.2 -0.7
53.9 53.8 52.4 7.5 1.50 -0.3 0.5 54.0 -0.5
Jun Jun 1Q T May
4.0 108.5 -1.0 26.0
108.1 -0.2
Jun-25 Jun-20 May May
0.05 267.0 0.0 1.0
0.05
May May May Jun F
1.0 3.0 5.0 95.0
0.4 3.3 5.4 94.6
3.8 108.0
0.05
0.1 1.2
5.5 96.0
Source: Bloomberg, Reuters, ABN AMRO Group Economics (we provide own forecasts only for selected k ey variables and events)
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